Thursday, March 05, 2009

A Bad Idea?

The centerpiece of Prime Minister Taro Aso's big stimulus package has been a one-time cash handout of 12,000 yen, or about $120, to each resident. The idea has been widely panned by political foes, economists and the public alike as a wasteful, ineffective idea. (Mainichi Japan) March 5, 2009

We will soon be able to have a cash handout of around $120 and I am wondering what I should spend it on.

Some economists suggest that such money should go to the most needy or to the more public programs like reforming school and hospital buildings and roads and bridges.

I think there're pros and cons in the viewpoint of, say, morality (is it good for us to be given money without any effort?), but I don't think that a one-shot helicopter cash is so a bad idea as to stimulate and to revive the economy, but it's on the condition that we'll definitely spend it on something sold in the economy. It doesn't make sense if we don't spend but save it instead, I mean, if so, the cash will just be moved from government's to people's safe; It won't result in anyone's further income and then further expenditure.

So we have to use this cash to eat, to drink, to buy the clothing that we've wanted, and so on. The economy now needs stimulating the consumption first and investment second, as many econ textbooks tell. However,the impact of this stimulus policy is thought to be temporary, not permanent so we won't be able to expect that the economy will strongly recover forever.

(In the above picture, a man is handing in the envelopes of the cash. The time to spend is coming soon.)

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